Matt Schoenfeld of Burford Capital has produced a pre-Aruba  piece: “Form Corwin to Dell: The Cost of Turning a Blind Eye”, that discusses the potential impact of recent Delaware Supreme Court rulings in Dell and other cases.

The SSRN abstract is below:


This essay considers the ramifications of the Delaware Supreme Court’s December 2017 Dell appraisal decision within the context of Delaware’s more sweeping clampdown on shareholder litigation protections in recent years, beginning with Corwin in 2015.

While the Delaware Supreme Court rejected the “judicial gloss” of a formalized deal price rule in Dell, the gloss has, for all intents and purposes, been applied. The appraisal remedy had already been enfeebled in recent years by a slew of at-or-below deal price rulings, but Dell’s promulgation of a de facto procedural safe harbor marks a more systematic curtailment.
The efficacy, as well as the public policy coherency, of Dell is tied to the notion that procedural “best practices” lead to, or are reflective of, fair dealing. Unfortunately, this is often not the case because the actors who are most likely to be conflicted are also the ones most likely to be in control the narrative presented in public-facing materials, particularly amid a broader boardroom shift—the “lone-insider” effect—which has undermined the monitoring capabilities of independent directors.
In addition to lower deal premia and higher agency costs, the primary effects of Delaware’s post-2015 effort to dull shareholder defenses, culminating in Dell, will likely be: 1) faster CEO pay growth, and 2) more M&A and higher industry-specific measures of concentration, which research has shown to contribute to declining competition, lower levels of labor market mobility, wage stagnation, and increasing inequality in the United States.

Cooley LLP provided a recap of 2017 M&A, along with an outlook for 2018 for Lexology, which includes a discussion of appraisal conditions in private M&A deals. We have blogged previously about the possibility of acquirers including appraisal conditions in public deals.

This 2018 M&A Outlook is a good reminder of the role that appraisal plays in mergers of non-public companies. As Cooley observes: “While the inclusion of any appraisal rights condition remains uncommon in public deals, we commonly negotiate these conditions in private sales of venture-backed companies. Commonly accepted conditions take one of two forms: the absence of available appraisal rights altogether or appraisal rights not having been exercised by a certain percentage of shares.” The piece further suggests the legality of any such advance waivers of appraisal rights “has not been resolved by the courts.”

As reported by Pensions & Investments, the Arkansas Teachers Retirement System has committed $30 million to an alternative asset manager specializing in appraisal opportunities. Further highlighting the focus on appraisal, the Fund committed an additional $30 million to a different fund, but agreed to expand that fund to include appraisal.

As we’ve blogged about before, appraisal can be both a critical investor protection and a viable way for investors to increase returns in M&A deals. The past several years have seen more institutional investors getting involved in appraisal – something some have suggested is part of the duties they have to their beneficiaries.